Govt likely to grant tax exemption to online businesses

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ISLAMABAD: The government is likely to give tax exemption to online businesses in the country, sources said, adding that the Ministry of Commerce has already made a proposal in this regard.

Taxation is one of the major issues for the stakeholders of e-commerce platforms in Pakistan. According to the policy framework proposed by the commerce ministry, “For the purpose of provincial sales tax, online business should be incentivised and policies should be harmonised to avoid double taxation. In addition, simplification of the tax procedures, including general sales tax, is necessary for the e-commerce sector.”

Despite 161 million cellular subscribers, 70 million 3G/4G subscribers, 72 million broadband subscribers and a total teledensity of 76.56pc as of July 2019, the e-commerce market in Pakistan is still at a nascent stage with modest Internet sales figures.

However, it is an emerging sector, with a noticeable surge witnessed in the number of online vendors, local e-commerce platforms and online payment facilities introduced by banks and large cellular companies.

According to the State Bank of Pakistan (SBP) figures, excluding cash-on-delivery (CoD) sales, e-commerce sales stood at Rs18.7 billion by the end of June 2018 while the total size of Pakistan’s e-commerce market in 2018 was Rs99.3 billion. The number of registered e-commerce merchants rose by 260pc, whereas e-commerce payments more than doubled in the last 12 months.

Sources said that Prime Minister Imran Khan had asked the Commerce Division to frame a comprehensive national ‘E-commerce Policy Framework’ in consultation with all the stakeholders, including the private sector.

Following the orders, the Commerce Division had conducted extensive consultations with stakeholders from the Federal Board of Revenue (FBR), SBP, Securities and Exchange Commission of Pakistan (SECP), Ministry of IT and Telecom, provincial revenue authorities and the private sector to prepare the draft policy framework. They had also constituted five bodies to deliberate on the prospective framework. These included the National e-Commerce Advisory Council, National E-commerce Policy Board, National E-commerce Policy Unit, Five Working Groups on Taxation, Payments Infrastructure, Regulatory Framework, Logistics and e-Commerce & WTO.

Sources stated that the formulation of the e-commerce policy is a step towards fulfilling the government’s commitment to promote and encourage businesses, especially small traders, so that they could go online and foster holistic growth of e-commerce in Pakistan.

The proposed policy framework covers and provides guidelines on key components for promotion of the e-commerce sector, including regulatory environment, financial inclusion and digitization through payment infrastructure, empowerment of youth and small consumer protection, taxation, ICT infrastructure, logistics, data protection and engagement in multilateral negotiations.

In pursuance of the cabinet’s decision on July 16, 2019, the Commerce Division held further consultations with the ministries of science & technology and communications before finalising the draft e-commerce policy framework.

It is pertinent to mention that globally, e-commerce has played an important role for success of multinationals as well as the small and medium enterprises (SMEs), as it helps reduce transaction costs, explores niche markets and avoids intermediaries.

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